Q: If Apple, Inc. sells 30,000 iPhones at $100 each on account, what is the correct journal entry to record the sale?

$$ \begin{align*} \text{Accounts Receivable} & \quad 3,000,000 \\ \text{Sales Revenue} & \quad 3,000,000 \\ \end{align*} $$

Q: Which formula correctly calculates the quick (acid-test) ratio?

$$ \frac{\text{Cash and cash equivalents} + \text{Short-term investments} + \text{Net current receivables}}{\text{Total current liabilities}} $$

Question 1

Which of the following is NOT a component of the Fraud Triangle as depicted in Exhibit 4-1?

Accepted Answer

Collusion

Question 2

According to Exhibit 4-3, what is the primary function of an internal control system?

Accepted Answer

To prevent fraud, waste, and inefficiency

Question 3

Which of the following is an example of a control procedure under the internal control system?

Accepted Answer

Smart hiring practices including background checks

Question 4

A company receives checks by mail. According to Exhibit 4-6, which department should prepare the deposit ticket?

Accepted Answer

Treasurer

Question 5

Which document is NOT typically included in a payment packet for internal control over purchases?

Accepted Answer

Sales Contract

Question 6

Which of the following is a limitation of internal controls?

Accepted Answer

They can be circumvented by collusion

Question 7

Which of the following items would be added to the book balance during a bank reconciliation?

Accepted Answer

Bank collections

Question 8

According to GAAP, when should revenue be recognized?

Accepted Answer

When goods are delivered or services performed

Question 9

If Apple, Inc. sells 30,000 iPhones at $100 each on account, what is the correct journal entry to record the sale?

Accepted Answer

$$
\begin{align*}
	ext{Accounts Receivable} & \quad 3,000,000 \
	ext{Sales Revenue} & \quad 3,000,000 \
\end{align*}
$$

Question 10

A company offers terms 2/10, n/30. What does this mean?

Accepted Answer

A 2% discount is available if paid within 10 days; otherwise, net amount is due in 30 days

Question 11

Which method is considered the best for measuring uncollectible accounts expense under GAAP?

Accepted Answer

Allowance method

Question 12

Using the percent-of-sales method, if total revenues are $394,328 million and the estimated uncollectible rate is 0.0002, what is the uncollectible-account expense?

Accepted Answer

$$
79	ext{ million}
$$

Question 13

Which inventory costing method results in the lowest taxable income when costs are rising?

Accepted Answer

LIFO

Question 14

If a company uses the FIFO method during a period of rising prices, which of the following is true?

Accepted Answer

Gross profit will be highest

Question 15

Which formula correctly calculates the quick (acid-test) ratio?

Accepted Answer

$$
\frac{	ext{Cash and cash equivalents} + 	ext{Short-term investments} + 	ext{Net current receivables}}{	ext{Total current liabilities}}
$$

Question 16

A company has net credit sales of $$500,000 and average net accounts receivable of 100$$,000. What is the accounts receivable turnover?

Accepted Answer

$$
5
$$

Question 17

Which inventory method provides the most up-to-date inventory cost on the balance sheet?

Accepted Answer

FIFO

Question 18

Under the lower-of-cost-or-market (LCM) rule, inventory should be reported at:

Accepted Answer

The lower of historical cost or market value

Question 19

If a company’s cost of goods sold is $$600,000 and average inventory is 150$$,000, what is the inventory turnover ratio?

Accepted Answer

$$
4
$$

Question 20

Which of the following best describes the effect of a LIFO liquidation?

Accepted Answer

It shifts older, lower costs into cost of goods sold

Internal Control, Revenue Recognition, Receivables, and Inventory: Study Notes for Financial Accounting

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